U.S. government reports petroleum inventories increased by 2.9 million barrels By Polya Lesova & Claudia Assis, MarketWatch SAN FRANCISCO (MarketWatch) -- Oil futures dipped below $83 a barrel on Wednesday, paring gains following a U.S. government report showing a build in crude inventories largely in line with expectations. A weaker dollar and improved sentiment on oil prices helped support crude. We are in a really strong pricing environment right now," said Jim Ritterbusch, President of Ritterbusch and Associates in Galena, Ill. Every time prices fall, investors are quick to "buy in the dips," he added. Crude oil for May delivery, the most actively traded contract, gained 29 cents, or 0.4%, to $82.67 a barrel. The contract traded at $83.41 a barrel moments before the Energy Information Administration's report become public. The EIA reported that crude-oil inventories increased by 2.9 million barrels in the week to March 26, in line with market expectations. Inventories of distillates, which includes diesel and heating oil, decreased by 1.1 million barrels, also in line with expectations. Gasoline inventories increased by 300,000 barrels, while analysts had expected a draw. May reformulated-gasoline futures were flat at $2.27 a gallon, and May heating-oil futures added one penny, or 0.3%, to $2.14 a gallon. Analysts polled by Platts expected an increase of 2.65 million barrels in crude inventories. They also projected declines of 2 million barrels for gasoline stocks and 1.2 million barrels for distillate supplies. Crude supplies rose by 421,000 barrels during the week ended March 26, the American Petroleum Institute, a Washington-based industry group, reported late Tuesday. Gasoline stocks declined by 946,000 barrels and distillate supplies dropped by 1 million barrels last week, the API said. Last week, the EIA reported that crude inventories rose by 7.3 million barrels, a much bigger increase than analysts had anticipated. Besides the crude-oil inventories data being largely in line with anticipations, "the dollar remains weak, helping the market," said Addison Armstrong, an analyst with Tradition Energy in Stamford, Conn. The dollar index (DXY 81.12, -0.35, -0.43%) , which tracks the performance of the greenback against a basket of currencies, fell 0.5% to 81.02. Dollar weakness usually boosts dollar-denominated oil futures because it makes them cheaper for holders of other currencies. But this week's rally "has been accomplished on rather moderate volume, so we're not seeing a lot of enthusiasm supporting the market," Armstrong added. The market could turn negative later today as people start selling their positions ahead of Friday's holiday, he said. Edward Meir, senior commodity analyst at MF Global, said he's cautious about oil prices at current levels. "For one thing, funds may be reluctant to add to length considering that OPEC itself is getting somewhat nervous and is already hinting that it may increase production at some later point," Meir wrote in a note to clients. Also, oil futures are approaching key technical resistance points, he said.

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